STRONG RECOVERY IN H2 WITH RECORD MARGIN AND EXCELLENT CASH CONVERSION - 2020 FULL YEAR RESULTS PRESENTATION
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STRONG RECOVERY IN H2 WITH RECORD MARGIN AND EXCELLENT CASH CONVERSION 2020 FULL YEAR RESULTS PRESENTATION 2 March 2021
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This presentation contains certain forward-looking statements with respect to the financial condition, results, operations and business of Intertek Group plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this presentation should be construed as a profit forecast. 2 March 2021
01 02 03 04 05 Performance 2020 Financial Divisional Review Growth 2021 Outlook Highlights Results Opportunities
LASER FOCUSED OPERATIONAL DISCIPLINE
INTERTEK’S HEROES MADE A BIG DIFFERENCE IN 2020
Blood Donations Medical Beds Community Support
Intertek Taiwan Chirag Parikh, Production Engineer, Azer Sanili, IT Manager
70 colleagues responded to the Taiwan Intertek Electrical Intertek Azerbaijan
Blood Services Foundation’s ‘red alert’ Worked long hours and weekends to Set up local donation initiative called
calling for volunteers to donate blood in complete urgent project on medical “Bigane Qalma”, that provided 45 families
the wake of Covid-19. beds built for those with severe affected by the pandemic with
lung congestion. relief packages.
Hand Sanitiser Face Masks
Ludwig Laibahas, HR Manager
Analytical & Textiles labs
Intertek Indonesia
Intertek Bangladesh
Provided face masks to colleagues in countries
Produced hand sanitizer and set up a ‘virtual
greatly affected by Covid-19, sending 154k to
hospital’ with oxygen tanks to help
HK, Taiwan, Korea, Philippines, China,
colleagues and their families .
Singapore and Malaysia.
5
GLOBAL INNOVATIONS SUPPORTING THE NEEDS OF OUR CLIENTS
Insert Footer Here 6
1
0
PERFORMANCE AHEAD OF EXPECTATIONS IN EARNINGS AND CASH
YoY YoY
2020 2019
(Actual rates) (Constant rates)
Revenue £2,741.7m £2,987.0m (8.2%) (6.7%)
Like-for-like revenue1 £2,735.9m £2,983.3m (8.3%) (6.8%)
Operating Profit2 £427.7m £524.2m (18.4%) (17.0%)
Adjusted Operating Margin2 15.6% 17.5% (190bps) (190bps)
Adjusted diluted EPS2 170.9p 212.5p (19.6%) (18.1%)
Adjusted FCF2 £435.6m £395.3m 10.2%
Financial net debt £419.9m £629.4m (33.3%)
Financial Net debt / Adjusted
0.7x 0.9x
EBITDA 2
ROIC 21.6% 23.7% (210bps) (190bps)
7
Notes: (1) Like-for-like revenue includes acquisitions following their 12 month anniversary of ownership and removes the historical contribution of any business disposals/closures; (2) Before separately
disclosed items; (3) Guidance as at November IMS
STRONG H2 RECOVERY WITH RECORD MARGIN
Revenue Operating Profit1
+8% 1,411 +56% 260
1,331
168
H1 20 H2 20 H1 20 H2 20
Operating Profit Margin1 Diluted EPS1
+570
18.4% +73% 107.8p
bps
12.6%
63.1p
H1 20 H2 20 H1 20 H2 20
Note: Growth rates and bps movement at constant currency; (1) Adjusted 8
BROAD BASED RECOVERY IN H2
Revenue (£m) Operating profit (£m) 1 Operating Profit Margin1
881 +760
+12% +61% 216 24.5%
bps
800
16.9%
Products 136
H1 20 H2 20 H1 20 H2 20 H1 20 H2 20
+240
+4%
298 +40% 27 bps
9.1%
295
6.8%
20
Trade
H1 20 H2 20 H1 20 H2 20 H1 20 H2 20
+160
232
+28% 7.1%
236 16 bps
5.3%
13
Resources
H1 20 H2 20 H1 20 H2 20 H1 20 H2 20
Note: Growth rates and bps movement at constant currency; (1) Adjusted
9
HIGHLY CASH GENERATIVE EARNINGS MODEL DELIVERS
01 02 03 04 05 Performance 2020 Financial Divisional Review Growth 2021 Outlook Highlights Results Opportunities
KEY P&L FINANCIALS
YoY %
2020 Actual Rates Constant Rates
Revenue £2,741.7m (8.2%) (6.7%)
Like-for-like revenue1 £2,735.9m (8.3%) (6.8%)
Operating profit2 £427.7m (18.4%) (17.0%)
Operating profit margin2 15.6% (190bps) (190bps)
Diluted earnings per share2 170.9p (19.6%) (18.1%)
Notes: (1) Like-for-like revenue includes acquisitions following their 12-month anniversary of ownership and removes the historical contribution of any business disposals/closures; (2) Before separately disclosed items
12OPERATING MARGIN BRIDGE
18.0%
17.5% (90bps)
17.0%
(100bps)
16.0% 10bps 15.7%
0bps (10bps) 0bps 15.6%
15.0% (180bps) at constant rates
14.0%
13.0%
Divisional mix
FX
Trade
Resources
FY 2019
FY 2020
Products
Excluding FX and
Acquisitions
& Disposals
Acquisitions
& Disposals
13
Note: Like-for-like revenue includes acquisitions following their 12-month anniversary of ownership and removes the historical contribution of any business disposals/closuresCASH FLOW & NET DEBT
£m @ actual exchange rates 2020 2019
Adjusted operating profit1 427.7 524.2
Depreciation/amortisation 174.0 171.5
Change in working capital 88.6 15.9
Other2 14.8 19.0
Adjusted cash flow from operations 705.1 730.6
Net capex (72.2) (114.3)
Other3 (197.3) (221.0)
Adjusted free cash flow 435.6 395.3 +10.2% YoY
Cash conversion %4 149% 126%
Acquisitions - (16.9)
Financial net debt 419.9 629.4
Financial net debt/Adjusted EBITDA (rolling 12 months) 0.7x 0.9x
Notes:
(1) Before separately disclosed items; (2) Comprises: special pension payments, add back equity settled transactions and other non-cash items; (3) Comprises: interest paid/received and tax, lease liability repayment;
14
(4) Adjusted operating cash flow as % of adjusted operating profit. Adjusted operating cash flow comprises: adjusted cash flow from operations less the lease liability repayment and after adding back the special
pension paymentsFINANCIAL GUIDANCE
FY 2021 Guidance
Net finance cost (pre-fx) £29-33m
Effective tax rate 26.5-27.0%
Minority interest £17-19m
Diluted shares (as at 31 December 2020) 162.3m
Capex £110-120m
Financial Net Debt £350-400m
Note: Net debt guidance before any material change in FX rates and any additional M&A 1501 02 03 04 05 Performance 2020 Financial Divisional Review Growth 2021 Outlook Highlights Results Opportunities
PRODUCTS BENEFITTED FROM A STRONG REBOUND IN H2
Revenue (£m) Operating profit (£m)1 Operating Profit Margin1 FY20 FY19 Growth
+12% 881 24.5% £m £m CCY
216 +760
800 +61% bps Revenue 1,681.6 1,796.7 (5.7%)
16.9%
Like-for-like
1,676.2 1,794.5 (5.9%)
136 Revenue
Adjusted Operating
351.6 405.4 (12.4%)
Profit
Adjusted Operating
20.9% 22.6% (160bps)
H1 20 H2 20 H1 20 H2 20 Margin
H1 20 H2 20
H1 20 Actuals H2 20 Actuals Growth Drivers FY20 Actuals
Supply chain
Double-digit Mid-single-digit Increased number of Increased demand in Double-digit
Softlines expansion in new
negative negative Brands & SKUs chemical testing negative
markets
Innovation from our
Double-digit Low-single-digit Increased demand for Innovative inspection Mid-single-digit
Hardlines customers leveraging
negative negative chemical testing technology negative
wireless technology
Electrical appliance innovations to
Electrical & Connected Low-single-digit Increased demand for IoT Assurance
Robust provide better efficiency and Solid
World negative services, including cyber security
connectivity
Note: Growth rates and bps movement at constant currency; (1) Adjusted 17PRODUCTS BENEFITTED FROM A STRONG REBOUND IN H2
H1 20 Actuals H2 20 Actuals Growth Drivers FY20 Actuals
Increased focus of ISO Increased consumer and
High-single-digit Mid-single-digit
Business Assurance Solid corporations on supply chain standards government focus on ethical
negative negative
and risk management upgrades and sustainable supply
Building & Mid-single-digit Growing demand for greener, safer and Increased investment in large Low-single-digit
Stable
Construction negative higher quality commercial buildings infrastructure projects negative
Continued investment of our Increased
Transportation High-single-digit Double-digit Growth in the hybrid / Double-digit
clients in new models and new scrutiny on
Technology negative negative electric engine segment negative
fuel efficient engines emissions
Growth in the food
Mid-single-digit Continuous food Increased focus on the
Food Good service assurance Solid
negative innovation safety of supply chains
business
Chemicals and Double-digit Mid-single-digit Growth of Expansion of the supply base Increased concerns on product High-single-digit
Pharma negative negative SKUs in emerging markets safety and traceability negative
INNOVATIONS
2.0
18
18H2 PERFORMANCE IMPROVEMENT IN TRADE
Revenue (£m) Operating Profit (£m)1 Operating Margin1 FY20 FY19 Growth
£m £m CCY
+4%
295 298 +240 9.1%
+40%
27 Revenue 592.6 679.4 (9.9%)
bps
6.8%
20 Like for like
592.6 679.4 (9.9%)
Revenue
Adjusted
47.1 86.6 (42.6%)
H1 20 H2 20 H1 20 H2 20 H1 20 H2 20 Operating Profit
Adjusted
7.9% 12.7% (460bps)
Operating Margin
H1 20 Actuals H2 20 Actuals Growth Drivers FY20 Actuals
High-single-digit High-single-digit Global and regional trade structural High-single-digit
Caleb Brett Increased transport infrastructure
negative negative growth drivers negative
Government & Trade Double-digit Double-digit Double-digit
Award of new contracts GDP growth Population growth
Services negative negative negative
The expansion of our clients’ supply
AgriWorld Stable Robust New customer wins Solid
chains in fast growing markets
FUEL TESTING TECHNOLOGY: BLOCKCHAIN
INNOVATIONS NEW CETANE RATING UNIT POWERED POST-TRADE
IN SHANGHAI MANAGEMENT
19
Note: Growth rates and bps movement at constant currency; (1) Adjusted 19H2 PROFIT AND MARGIN PROGRESSION IN RESOURCES
Revenue (£m) Operating Profit (£m)1 Operating Margin1
+160 7.1% FY20 FY19 Growth
236 232 +28% 16 5.3% bps £m £m CCY
13
Revenue 467.5 510.9 (6.3%)
Like for like
467.1 509.4 (6.1%)
Revenue
Adjusted Operating
H1 20 H2 20 H1 20 H2 20 H1 20 H2 20 29.0 32.2 (8.2%)
Profit
Adjusted Operating
6.2% 6.3% (10bps)
Margin
H1 20 Actuals H2 20 Actuals Growth Drivers FY20 Actuals
High-single-digit Technological Low-single-digit
Capex Inspection Good Demand for energy Asset productivity
negative innovation negative
Double-digit Double-digit Double-digit
Opex Inspection Capacity utilisation Ageing of equipment Asset productivity
negative negative negative
Technological
Minerals Robust Good Minerals demand Outsourcing Robust
innovation
XRD BATCH
INNOVATIONS FOR IRON
ORES
20
Note: Growth rates and bps movement at constant currency; (1) Adjusted 2001 02 03 04 05 Performance 2020 Financial Divisional Review Growth 2021 Outlook Highlights Results Opportunities
INTERTEK IS A FORCE FOR GOOD
OUR PURPOSE
Bringing Quality, Safety and Sustainability to Life
OUR VISION
To be the world’s most trusted partner for
Quality Assurance
OUR VALUES
• We are a global family that values diversity
• We always do the right thing. With precision,
pace and passion
• We trust each other and have fun winning
together
• We own and shape our future
• We create sustainable growth. For all
Insert Footer Here 22COVID-19 HAS MADE THE CASE FOR TOTAL QUALITY ASSURANCE STRONGER
TESTING, INSPECTION & CERTIFICATION PROVIDES QUALITY & SAFETY CONTROLS
SUPPLY PRODUCTION DISTRIBUTION RETAIL
TIER 3 TIER 2 TIER 1 3RD PARTY OWNED TRANSPORTATION DISTRIBUTION CENTRES IN-STORE ONLINE CONSUMER
ASSURANCE
TESTING TESTING
RISK BASED QUALITY ASSURANCE
INSPECTION INSPECTION
CERTIFICATION CERTIFICATION
ASSURANCE PROVIDES AN END-TO-END ASSESSMENT OF QUALITY & SAFETY PROCESSES
©Intertek GroupINCREASED CORPORATE FOCUS ON RISK POST COVID-19
SAFER SUPPLY LOW CARBON SOCIETY BETTER PERSONAL SAFETY
• Increased supply resilience • Mandatory ESG disclosures
• Higher health, safety, well-being
• Faster access to critical supplies • Carbon emission reductions standards everywhere
• Improved supply intelligence • Infrastructure and corporate • Increased usage of PPE
• Higher focus on operational investments to deliver Net Zero
• Increased investment in health & safety
sustainability • E-commerce at the workplace and public spaces
• End-to-end traceability • Working remotely • Increased investment in pharma
industry
• Better safety risk management locally &
globally
87% of Companies will invest within two years to make their supply chain more resilient
Source: 2020 Gartner Supply Chain Survey of 528 supply chain professionalsTHE ATIC INDUSTRY WILL GROW FASTER POST COVID-19
GLOBAL ATIC MARKET GROWTH OPPORTUNITY
01
CUSTOMER
RETENTION
$50BN
Currently 02
outsourced CUSTOMER
PENETRATION
03
$200bn ATIC CROSS-
SELLING
Currently in-house
04
NEW
CUSTOMER
WINS
Untapped 05
potential CUSTOMER
OUTSOURCING
25WELL POSITIONED TO BENEFIT FROM FASTER ATIC GROWTH
Systemic approach to Quality and Safety
43,800 EMPLOYEES
GLOBAL MARKET ASSURANCE TESTING INSPECTION CERTIFICATION
LEADER IN ASSURANCE
3,000 AUDITORS
90,000+ AUDITS
100+ COUNTRIES
GLOBAL MARKET
LEADER IN TIC
1,000+ LABS & OFFICES Our Sectors
80+ LANGUAGES
Products | Trade | Resources
©Intertek GroupGDP+ GROWTH OUTLOOK
PRODUCTS ATIC TRADE ATIC RESOURCES ATIC
61% OFREVENUE 22% OFREVENUE 17% OFREVENUE
82% OFPROFIT 11% OFPROFIT 7% OFPROFIT
GDP+ GDP GROWTH LONG-TERM GROWTH
Growth in Brands, Faster Population Growth Population Growth Investment in E&P,
GDP growth
SKUs & e-Commerce innovationcycle & social mobility & social mobility Storage & Transportation
Increased focus on safety, Increased demand for Development of Improvements in transport Total Energy with Accelerated transition to
performance and quality Smart products regional trade infrastructure diversified portfolio renewable energies
Higher demand for healthy & Emerging Markets Increased need for Increased Focus on Increased Focus on Digital Supply chain
sustainably sourced products growing Middle Class end to end traceability Operational Sustainability Operational Sustainability management
CORPORATE ASSURANCE
ATIC Risk-based Increased Health, Safety People Supply Intelligence Corporate Enterprise
quality assurance regulation and Wellbeing Assurance & Resiliency Sustainability Cyber-security
GROWTH OUTLOOK: GDP+ LIKE FOR LIKE REVENUE GROWTH IN REAL TERMS
27SUSTAINABLE VALUE CREATION FOR ALL STAKEHOLDERS
Intertek high quality
2020
earnings model
Revenue £2.7bn
EBITDA margin 1 22%
Cash Conversion 2 149%
Capex £80m
Dividend Payout 105.8p
FCF £436m
Financial net debt to 0.7x
EBITDA 1
ROIC 1 21.6%
Co2t / employee 4.3
Notes: (1) Adjusted; (2) Cash flow for cash conversion (includes IFRS 16 repayment of lease liability) 28SUPPORTING OUR CLIENTS DELIVER THEIR SUSTAINABILITY AGENDA
Systemic End-to-End Sustainability Solutions
INTERTEK OPERATIONAL SUSTAINABILITY INTERTEK CORPORATE SUSTAINABILITY
Intertek ESG Audit
SOLUTIONS CERTIFICATION
Helping organizations Independent audit of
achieve sustainability excellence sustainability disclosures
and reporting
Life Cycle Value Chain
Assessment Resilience
Independent
Product & Packaging Sustainability verification
Stewardship Auditing
Certify corporate sustainability programmes
Circular Economy Substance Insights
Disclosure Analysis Quality & Safety Compliance
People & Culture Financial
Eco-Claims & Environmental Communities Environment
Certification solutions
Risk Governance Enterprise Security
Assessment Risk Management Communication & Disclosures
Safety. Everywhere.
Every day.
29DELIVERING SUSTAINABILITY EXCELLENCE ACROSS ALL OPERATIONS
SUSTAINABILITY CENTRAL TO OUR
5X5 STRATEGY
END-TO-END SYSTEMIC SUSTAINABILITY APPROACH
3001 02 03 04 05 Performance 2020 Financial Divisional Review Growth 2021 Outlook Highlights Results Opportunities
LIKE-FOR-LIKE REVENUE TRAJECTORY
2020 Group YoY % 2020 Products YoY %
Jan-Apr
Jan-Apr May-Jun
May-Jun Jul-Oct
Jul-Oct Nov-Dec
Nov-Dec Jan-Apr
Jan-Apr May-Jun
May-Jun Jul-Oct
Jul-Oct Nov-Dec
Nov-Dec
(1.4%)
(4.9%) (4.6%) (4.0%)
(6.3%) (6.6%)
(13.4%) (12.4%)
2020 Resources YoY %
2020 Trade YoY %
Jan-Apr
Jan-Apr May-Jun
May-Jun Jul-Oct
Jul-Oct Nov-Dec
Nov-Dec
Jan-Apr May-Jun Jul-Oct Nov-Dec 2.4%
Jan-Apr May-Jun Jul-Oct Nov-Dec
(5.9%)
(10.1%) (8.5%)
(9.6%)
(10.6%)
(10.7%)
(18.1%)
Note: At constant currency rates 32GLOBAL MOBILITY SLOWED AS A THIRD WAVE EMERGED
Global Greater China Asia Pacific
0%
- - -
(3%) (2%)
(20%) (20%) (6%) (9%) (7%) (4%) (8%) (12%) (12%) (20%)
(13%) (12%) (11%) (15%) (10%) (13%)
(17%) (17%) (14%) (14%) (16%) (17%)
(21%) (21%) (19%) (19%) (18%)
(16%)
(19%) (21%) (21%) (19%) (25%) (24%) (21%)
(40%) (34%)
(40%) (40%)
(38%)
(60%) (48%) (60%) (60%) (46%)
(80%) (80%) (80%)
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
South Asia MENAP Sub-Saharan Africa
2% 5%
1%
- - -
(1%) (1%) (0%)
(5%)
(20%) (9%) (20%) (13%) (13%) (11%) (15%) (13%) (20%) (14%)
(16%) (16%) (14%) (14%)
(19%) (21%) (21%) (17%)
(28%) (24%)
(22%) (25%) (21%) (22%)
(40%) (33%) (40%) (31%) (40%) (31%) (29%) (30%)
(44%) (44%)
(60%) (49%) (60%) (51%) (60%)
(64%) (65%)
(80%) (80%) (80%)
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
North America Latin America Europe and Central Asia
1% 1%
- - -
(0%)
(20%) (20%) (20%) (12%) (15%)
(17%) (15%) (16%) (13%) (13%)
(22%) (20%) (20%) (20%) (21%) (24%) (25%) (21%)
(40%) (27%) (40%)
(24%) (27%) (24%) (40%) (28%) (24%) (27%) (28%)
(32%) (34%) (32%) (34%) (30%) (34%) (34%)
(44%) (42%) (38%)
(60%) (60%) (51%) (60%) (49%)
(58%)
(80%) (80%) (80%)
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
Sources: Google. Baseline is measured as the 5-week period Jan 3 – Feb 6 2020.GROUP OUTLOOK 2021
• Good like-for-like revenue growth at
constant currency
• Margin progression year-on-year
• Strong free cash flow performance
• Capex: £110-120m
• Financial net debt: £350-400m
34INTERTEK IS A FORCE FOR GOOD DELIVERING VALUE FOR ALL
• The agility and energy of our customer centric organisation has
made a huge difference to deliver a resilient 2020 performance
with Earnings and Cash ahead of expectations.
• We have benefited from a broad-based recovery in H2 with a
record operating margin and cash conversion delivering double
digit free cashflow growth.
• We are well positioned to benefit from exciting growth
opportunity driven by the Covid-19 recovery, increased corporate
needs for TQA and M&A growth opportunities.
• We will capitalise on our High-Quality Earnings model to seize
these exciting growth opportunities and deliver sustainable value
creation for all.
• Intertek is a Force for Good in society helping our clients to deliver
their sustainability agendas and leading by example focussed
internally on sustainability excellence.GROUP PERFORMANCE (2015 – 2020)
Revenue (£m) Adjusted Operating Profit (£m) 1 Adjusted Operating Margin (%) 1
£2,987m £482m £524m 17.5%
£2,769m £2,801m £468m 17.2%
£2,742m £428m
£2,567m £410m 16.9%
£2,166m £343m
59% 60% 60% 77%
57% 61% 75% 77%
51% 73% 15.9% 16.0%
82%
68% 15.6%
25% 23% 23% 23% 23% 22%
22% 20% 19% 17% 17%
24% 20% 18% 17% 17% 17% 11%
10% 7% 6% 6% 6% 7%
FY 15 FY 16 FY 17 FY 18 FY 19 FY20 FY 15 FY 16 FY 17 FY 18 FY 19 FY20 FY 15 FY 16 FY 17 FY 18 FY 19 FY20
Adjusted Operating Margin Key Metrics 2020
FY 15 FY 16 FY 17 FY 18 FY 19 FY20 Like-for-like Revenue
% Group Revenue % Group Profit
Growth2
Products 21.1% 20.3% 21.6% 22.1% 22.6% 20.9% 61% 82% (5.9%)
Trade 14.1% 14.0% 13.7% 13.0% 12.7% 7.9% 22% 11% (9.9%)
Resources 6.5% 5.8% 5.7% 5.7% 6.3% 6.2% 17% 7% (6.1%)
Group 15.9% 16.0% 16.9% 17.2% 17.5% 15.6% 100% 100% (6.8%)
37
Notes: (1) IFRS 16 was adopted on 1 Jan 19 and as such results prior to 2019 are on an IAS 17 basis; (2) At 2020 constant currency ratesADJUSTED EPS
£m @ actual exchange rates FY 20 FY 19
Adjusted operating profit 427.7 524.2 (18.4%)
Net interest expense (34.9) (39.4)
Profit before tax 392.8 484.8
Tax (100.2) (118.8)
Profit after tax 292.6 366.0
Minority interest (15.3) (20.5)
Net profit 277.3 345.5
Fully diluted shares (m) 162.3 162.6
Earnings per share (p) 170.9 212.5 (19.6%)
Dividend (p) 105.8 105.8 -
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